Leeway for online retailers

Relief route

Mumbai/New Delhi, June 4 (Reuters): The government may allow global online retailers such as Amazon.com to sell their own products as early as next month, removing restrictions that could boost competition in one of the world’s biggest and most price-sensitive retail markets.

The decision, which is likely to be announced in the budget, is one of the first tangible signs of economic reform by the business-friendly government of Prime Minister Narendra Modi.

The move is also likely to allow the government to circumvent political opposition to opening up the $500-billion retail sector to global giants such as Wal-Mart Stores Inc.

Four people privy to discussions within the government said officials believed a more robust online retail sector would spur manufacturing and consumption, helping to revive an economy that has been growing at below 5 per cent for two years, the longest period of sub-par expansion since the late 1980s.

“Most stakeholders support FDI (foreign direct investment),” said a senior government official, referring to e-commerce.

“We have pitched for opening it up completely.”

Industry surveys say e-commerce can contribute as much as 4 per cent to the economy by 2020.

A spokesperson for the commerce and industry ministry declined to comment.

The industry ministry that drafts FDI rules recently met officials from companies such as Amazon, Google, eBay, Wal-Mart and domestic e-tailer Flipkart to finalise the investment guidelines, the sources said.

Global online retailers such as Amazon and eBay are banned from selling products they have sourced themselves, and must rely on third-party suppliers. Their platforms, which they own fully, are marketplaces for these outside suppliers.

The government is likely to end this ban, paving the way for global retailers to bring their formidable supply chain and cheaper goods, potentially boosting consumption and benefiting small manufacturers and traders.

Meanwhile, the Confederation of All India Traders has said the government should not allow FDI in e-commerce retail as it would grant back-door entry to foreign players in multi-brand retail.